Correlation Between Black Stone and Barnwell Industries

Can any of the company-specific risk be diversified away by investing in both Black Stone and Barnwell Industries at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Black Stone and Barnwell Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Black Stone Minerals and Barnwell Industries, you can compare the effects of market volatilities on Black Stone and Barnwell Industries and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Black Stone with a short position of Barnwell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Stone and Barnwell Industries.

Diversification Opportunities for Black Stone and Barnwell Industries

0.52

Correlation Coefficient

Black Stone  Barnwell Industries

Very weak diversification

The 3 months correlation between Black and Barnwell is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Black Stone Minerals and Barnwell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnwell Industries and Black Stone is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Black Stone Minerals are associated (or correlated) with Barnwell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barnwell Industries has no effect on the direction of Black Stone i.e., Black Stone and Barnwell Industries go up and down completely randomly.

Pair Corralation between Black Stone and Barnwell Industries

Considering the 90-day investment horizon Black Stone Minerals is expected to generate 0.31 times more return on investment than Barnwell Industries. However, Black Stone Minerals is 3.28 times less risky than Barnwell Industries. It trades about 0.0 of its potential returns per unit of risk. Barnwell Industries is currently generating about -0.04 per unit of risk. If you would invest  1,514  in Black Stone Minerals on November 28, 2024 and sell it today you would lose (3.00) from holding Black Stone Minerals or give up 0.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Black Stone Minerals  vs.  Barnwell Industries

Black Stone Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Black Stone Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Black Stone is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Barnwell Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Barnwell Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Black Stone and Barnwell Industries

The main advantage of trading using opposite Black Stone and Barnwell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Stone position performs unexpectedly, Barnwell Industries can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Barnwell Industries will offset losses from the drop in Barnwell Industries' long position.

The idea behind Black Stone Minerals and Barnwell Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.